Does your tenancy agreement make you a real tenant (in law)?
Tenancy is a common form of dealing in land in Malaysia as it allows two or more people to enjoy the benefits of owning an estate: the registered proprietor (i.e. the landowner / landlord) will receive the profits from rent and the holder of the tenancy (i.e. the tenant) will enjoy the occupation and possession of the estate. The term of a ‘tenancy’ or ‘lease’[i], however, must not be confused with the term ‘license’ which equally entitles the holder to enjoy occupation on an estate.
Tenancy And License Explained
To put it simply, tenancy creates an interest in law, entitling the tenant with rights and remedies under the National Land Code. It is a form of proprietary right (right in rem) and the interest may pass in land.
On the other hand, a license is merely a personal obligation, giving rise to personal right (right in personam), without creating any interest in land. It allows the license holder to use the premise, usually on a temporary basis and never to the extent of occupying or possessing it exclusively. For examples, holder of a license may enter into a cinema to watch a movie[ii], park his car on someone else’s land[iii] or enter into a hotel as a lodger.
The difference becomes particularly essential when one sought to prove that he has an interest in land which is enforceable and capable of protection within the terms of the legislation against third parties[iv], who are usually the purchasers of an estate.
Distinguishing Tenancy And License
It is well established in law that mere words or terminology used in an agreement is not substantial in determining whether a tenancy exists or otherwise. As such, what the parties said or professed in the agreement, albeit being precisely labelled as one or the other, does not alter what is, in effect, a tenancy into a license and vice versa. Instead, the court will give due consideration to the intention of the parties, the substance of the agreement, the conduct of all the parties and the surrounding circumstances[v].
Perhaps the most celebrated case on this subject is Street v Mountford[vi], whereby Lord Templeman, a Judge in the House of Lords (being the highest court in United Kingdom then) has provided much guidance in his speech when His Lordship held that in order ‘to constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments’. Closer to home, Street v Mountford was referred to in Lim Cheang Hock & Anor v Tneh Poay Lan[vii] whereby the Court of Appeal concluded that ‘it appeared to be settled by the authorities that whether a particular relationship was that of license or tenant depended upon whether the person in occupation had exclusive possession of the subject matter’
Exclusive Possession Explained
Then it brings us to the next question; what exactly is exclusive possession? A right of exclusive possession is secured by the right of the tenant to maintain ejectment and, after his entry, trespass. A reservation to the landlord of a limited right of entry, for example to view or repair or inspect the state of cleanliness at reasonable hour[viii] is not inconsistent with a grant of exclusive possession[ix].
Conversely, if the landlord has obligations or retained rights over the estate which gives him (the landlord) unrestricted access to the estate, then there is arguably no exclusive possession and the agreement is a contractual license[x]. For example, these conducts negate the grant of exclusive possession: prohibiting visitors on the property[xi], and provision of services[xii]. It is interesting to note that the retention of keys by the landlord does not automatically prevent a finding of the grant of exclusive possession[xiii]. It depends on the facts of each case, particularly the purpose in which the keys are retained.
However, it is worth-while to take note that the English Court in Street v Mountford has added that "an occupier who enjoys exclusive possession is not necessarily a tenant". This recognises that exclusive possession itself may not be a hall-mark to the existence of a tenancy. In most situation, the court will have to peruse the nature and quality of the occupancy as a whole in order to determine its true character[xiv].
Chay Jo is a Senior Associate in Munhoe. His main practice areas are civil and commercial litigation.
[i] Tenancy refers to a short-term tenancy of not more than 3 years [See Section 223 National Land Code] and if it exceeds three years, it is usually known as a lease [See Section 221 National Land Code]
[ii] Hurst v Pictures Theatres Ltd  1 KB 1
[iii] Colchester & East Sussex Co-op v Kelevedon Labour Club  All ER (D)
[iv]Judith Sihombing in The National Land Code – A Commentary Binder 2 XXI paa 251
[v] Goh Gin Chye & Anor v Peck Teck Kian Realty Pte Ltd & Anor  2 MLJ 118
[vi]  1 AC 809
[vii]  4 MLJ 228
[viii] Bruton v London and Quadrant Housing Trust  3 All ER 481
[ix] Radaich v Smith  101 CLR 2009
[x] Westminster City Council v Clarke  2 A.C. 288
[xi] Westminster City Council v Clarke  2 A.C. 288
[xii] Marchant v Charters  1 WLR 1181
[xiii] Aslan v Murphy  1 WLR 767
[xiv] Majlis Perbandaran Petaling Jaya v Strukturmas (Selangor) Sdn Bhd  MLJU 313